Tian Xiaocong is an associate professor in the Department of Strategy Innovation and Entrepreneurship of the School of Management, Shandong University. She has been named for the Young Scholar Future Plan Cultivation Project of Shandong University, and her main research interests include international commerce, corporate governance and other areas. Professor Tian has presided over and participated in multiple programs of the National Natural Science Foundation of China, and her research results have been published in the Academy of Management Journal, Journal of International Business Studies, Journal of World Business, International Business Review and other high-level international journals of Management.
In recent years, with the rising trend of nationalist and anti-globalization sentiments, multinational enterprises are facing enormous pressure and challenges in host countries. A series of international conflicts particularly, such as the Russia-Ukraine Conflict and the Israeli-Palestinian Conflict, further aggravated geopolitical tensions and economic decoupling. In the face of such international situations, multinational enterprises are increasingly affected by the governance scrutiny triggered by the rising social movements and backlash on social media. Host country sentiments have become an important force in shaping the strategic actions and outcomes of multinational enterprises in foreign markets. The latest research result of Associate Professor Tian's team, A theory of host country sentiments: An illustration in cross-border acquisitions, was published in the top international journal, Academy of Management Journal, in the field of Management in November 2023. The paper systematically elaborates on the general theory of host country sentiments and proposes practical suggestions on the role of the structure and dynamics of host country sentiments in cross-border acquisitions.
The Influential Mechanism of Host Country Sentiments on Cross-border Acquisitions.
Based on the sentiment diffusion and mobilization aided by mass media and social media, the study proposes a general theory of host country sentiments which argues that the host country is a value-laden and sentimental context wherein a foreign entity’s strategic action stimulates host country stakeholders’ social sentiments and engagement in systems of discourses (sentiment arousal), mobilizes social sentiments toward the foreign entity (sentiment competence), and legitimizes social sentiments and the strategic action of the foreign entity (sentiment resonance).
The study specifically selected the example of a Chinese company acquiring an American company as the research background and delved into the structure and dynamic patterns of host country sentiments. Through empirical analysis, the study has shown that firstly, host country stakeholders’ sentiments toward the deal, the acquirer, and overall investment from the acquirer's home country are all conducive to the acquisition. The deal of cross-border acquisitions will stimulate discussions among host country stakeholders, and legitimize ideas, viewpoints, and practices by linking them with social construction through a discourse system. Therefore, host country sentiments are a powerful force in shaping social judgment and awareness.
Secondly, the sentiment volatility of the host country may exert negative effects on acquisition. If there were significant differences in host country stakeholders’ sentiments-indicating conflicting attitudes among them, it would bring higher risks to the acquisition. If there were high degrees of vigilance and disagreement among host country stakeholders, with relatively large sentiment volatility, it would stimulate some host country stakeholders to take specific social and political actions, thus making the completion of acquisition more difficult.
Thirdly, the sentiment wavelength of the host country may exert negative effects on acquisition. The emotional wavelength reflects the time, speed, and frequency at which host country stakeholders are motivated to participate in social constructions and interactions. The shorter the sentiment wavelength of the host country, the higher the frequency of alternating their positive and negative perspectives, and it is easier to activate sentiments and energy. Frequent discourse alternation helps to promote the construction of discourse legitimacy, thus facilitating the completion of acquisition.
Fourthly, sentiment augmentation of the host country may exert positive effects on acquisition. Although the focus of cross-border acquisitions is on the deal, the evaluations of the deal are often influenced by host country stakeholders’ evaluations of the acquirer and the overall investments in the host country. Sentiments towards the acquirer and investments from China may have overflow effects on the deal sentiments.
The Illustration of Host Country Sentiments Theory on Enterprise Management
The paper has important practical value for the strategic actions and management of multinational enterprises, which is mainly reflected in the following three aspects. Firstly, managers of multinational enterprises need to actively pay attention to host country sentiments. Jeffrey Garten, Dean Emeritus of the Yale School of Management, Yale University, pointed out in an article in Fortune that “The winds of populism, protectionism, and xenophobia in some cases are blowing in ways we have never experienced in our lives.” By revealing the general theory of host country sentiments, the study helps managers systematically understand how enterprise strategic actions trigger social sentiments in the host country, and gain a deeper understanding of the complex interplay between stakeholder discourse systems and multinational enterprise strategic outcomes.
Secondly, when making cross-border acquisition decisions, apart from evaluating the macroeconomic, political, and cultural conditions of the target country, multinational enterprises should also evaluate social sentiments of the target country. Social sentiments require close attention from multinational enterprises, and social sentiments include not only the sentiments of target country stakeholders towards the multinational enterprise's host country and the company, but also their sentiments towards the acquisition deals, which require early evaluations and predictions. The action helps multinational enterprise managers determine whether there are legal risks related to sentiments during the acquisition process and avoid making incorrect acquisition decisions.
Thirdly, multinational enterprises need to notice and manage the structure and dynamic changes of host country sentiments during cross-border acquisitions. For acquirers from developing countries such as China, cross-border acquisitions in developed countries can easily evolve into social public issues, sometimes even causing political or social unrest. The notice and management of the host country's sentiments will directly affect the success or failure of the acquisition plan. Managers of multinational enterprises should endeavor to improve host country sentiments towards M&A transactions by adopting relevant measures, such as enhanced communication, improved transparency, and built feedback mechanisms. Meanwhile, during the acquisition process, active actions should also be taken to maintain the host country's sentiments toward the enterprise, and maintain sentimental positivity, stability, and interactivity, in order to facilitate smoother acquisition deals.
Link: https://journals.aom.org/doi/10.5465/amj.2022.0239
